Price and market trends: US PP, PE buyers see divergent pricing heading into Q2

05 April 2013 09:25  [Source: ICB]

With global PE prices falling it may be tough for producers to push through additional increases

US polyethylene (PE) and polypropylene (PP) buyers are seeing divergent pricing heading into the second quarter, after both markets saw price increases in the first few months of the year, sources said.

In the PE market, prices increased by 5 cents/lb ($110/tonne, €85/tonne) in January for all grades, and by an additional 4 cents/lb for most high density polyethylene (HDPE) grades in February.

US March contract negotiations for PE ended with film grades seeing a 4 cent/lb increase, while high density polyethylene (HDPE) injection and blow moulding grades were flat, sources said on 28 March.

The split settlement brings film grades, such as low density polyethylene (LDPE), linear-low density polyethylene (LLDPE), and HDPE high molecular weight film material, in line with the other grades.

"It is a done deal," said one producer. "We had taken our high density grades up in February, and now everything else is up by the same amount."

The increases are based on relatively high ethylene spot prices, which remain above 60 cents/lb, as well as lower-than-average supplier inventory levels. Producers have now turned their attention to pushing through an additional 4 cent/lb increase announced for 1 April. There is less support for that increase, with many buyers saying it is unlikely, based on the fact that global prices are falling.

Some producers agreed it will be tougher to implement an extra increase in April, but said some factors, such as a number of cracker turnarounds as well as rising global energy prices could provide some upward momentum for prices. Following the March settlement, prices for LLDPE butene film were at 74-76 cents/lb DEL (delivered), LDPE film prices were at 83-85 cents/lb DEL and HDPE blow moulding prices were at 72-74 cents/lb DEL, for small volume buyers, as assessed by ICIS. In the PP market, prices rose by 21.5 cents/lb over January and February, but dropped by 6 cents/lb in March, beginning what many market participants predict will be a steady slide through the second quarter.

The PP price hikes have hurt domestic demand, with many buyers cancelling all but minimum volumes, based on expectations that prices will be falling in April and May. Producer inventories grew by more than 100m lb (45,000 tonnes) in February.

By: Michelle Klump
+1 713 525 2653

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